Power to the people Utility Networks (UN) – a division of the Energy and Utilities Alliance (EUA) looks at what is needed to keep the utility industry providing ‘power to the people’…
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he UK’s energy network is in a cycle of transition. On one hand they have to address the challenge of maintaining a safe, reliable and efficient network, which will allow for future growth, while on the other hand they have to keep tariffs reasonable and fair without compromising the sustainability agenda. In terms of utility infrastructure the UK’s isn’t perfect; but the changes that have been overcome; in order to retain a robust and functional system are remarkable. In order to appreciate this, you have to understand where the industry has come from and where it is today. Thirty years ago the landscape was somewhat different; we had an electricity industry that comprised of 12 regional boards responsible for local distribution, and the Central Electricity Generating Board. The gas industry also comprised of 12 regional boards throughout the UK. Both of these industries were vertically integrated producers, transporters and suppliers of gas and electricity. There were 39 water authorities, 10 of which were state owned and 29 were in private ownership. In terms of utility supply, whether domestic or commercial, your geographic location determined your infrastructure provider. In effect it was a monopoly with no choice of provider or supplier. In the present day the landscape has changed dramatically. Some will tell you it is a vast improvement whilst others will say it’s a mess that is difficult to navigate through. The electricity industry is now split across the country by 14 licensed distribution network operators (DNOs), and each is responsible for a regional distribution
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services area. The 14 DNOs are owned by 6 different groups, and are regional based around the board regions, and own and operate the distribution network of towers and cables that bring electricity from our national transmission network to homes and businesses. They don’t sell electricity to consumers. This is done by the electricity suppliers. In addition there are also a number of smaller networks owned and operated by Independent Network Operators (IDNOs). These are located within the areas covered by the DNOs. Since the DNOs are natural monopolies, they are regulated by OFGEM to protect consumers from potential abuse of monopoly power. In order to be able to distribute electricity through the network, DNOs and IDNOs must hold a licence. The licences contain conditions which, among other things, limit the amount of revenue which these companies can recover from their customers. Gas has a similar structure of 4 Gas Distribution Networks (GDNs), with split – not necessarily equally – assets. OFGEM have granted licenses in a similar manner to electricity, but these companies are called Independent Gas Transporters (IGTs) and as such can also construct anywhere in the country within the GDN’s networks. Water is not dissimilar; there are now 26 water authorities in the UK regulated by OFWAT. As a consumer, water supply and subsequent sewerage is by catchment area, and unlike electricity & gas there is no independent suppliers, unless you are a very large user or building a very large domestic development.
Now it becomes a little more complicated; but beneficial to the consumer. Over and above the DNO’s, IDNO’s, GDN’s and IGT’s we have some more choice for you. OFGEM and OFWAT have championed ‘competition in connections’ which for the consumer, domestic and commercial alike is driving prices for infrastructure down, or at least keeping them low. We now also have Utility Connections Providers (UCPs) and a further acronym for their chosen activity as follows: • National Electrical Registration Scheme (NERS)- 194; • Gas Industry Registration Scheme (GIRS)- 97; • Water Industry Registration Scheme (WIRS)- 91. These schemes can be found at www.lloydsregister.co.uk That is, I am sure you will agree an awful lot of competition (and acronyms). However it is a structure that reflects the age of competition and comparison websites we live in. But it is not without its flaws, particularly in electricity and water services, which are fragmented. For example; electricity and water connection operatives face regional restrictions and differing qualification standards. Also the method used for quoting connections, be they for individual or multiple services can be confusing. In the case of gas however, the industry is streets ahead, with streamlined processes and the ability for connection operatives to work anywhere in the UK. This model needs to be replicated across all utilities, and would require OFGEM, OFWAT and Lloyds, with Industry Advisory Panels to let all UCP’s self-determine design, connection and commissioning of services & networks. The approach would require no upfront funding, as adequate finances are available, the regulators just need to use their powers to resolve unnecessary restrictions. The result would be more competitive prices for the customer.
However this is just one – albeit quite significant – piece of the utility architecture required to maintain a safe, reliable and efficient network. In addition to mobilising the market, the industry also needs to manage the supply and demand changes, which will accompany the transition to a low-carbon future – all the time keeping prices at levels customers and other stakeholders consider reasonable and fair. In order to do this, the workforce needs to be in place. An estimated 50% of current employees are set to leave the energy and utility sectors and 200,000 new recruits will be needed by 2023. The government and energy and utility employers must ‘take the bull by the horns’ and continue to strengthen the UK’s energy and utility workforce over the next 3 years. The challenges facing energy networks in the near future are very real. Investment and efficiencies are needed, and the workforce must be attracted and maintained. To achieve this, the industry needs to work together. It must also communicate its key messages to government effectively, in order to secure an energy policy that will support the needs of the industry and the people it serves. The role of Utility Networks is to facilitate the delivery of industry messages to the government. For membership enquiries contact Caroline Taylor – 01926 513762, caroline@eua.org.uk. ■
............................................... Utility Networks (UN) Tel: 01926 513765 mail@eua.org.uk www.eua.org.uk www.twitter.com/energyutilities
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